UniCredit offers investors bonds buyback

By: James Norris | 25 Jan 2012

UniCredit, Italy’s biggest bank by assets, has offered to buy back as much as €3bn ($3.9bn) of Tier 1 and Tier 2 bonds as part of its plan to boost its capital structure.

Chief executive Federico Ghizzoni is raising money to boost capital and comply with European Banking Authority targets. The move is part of a recovery strategy, which includes raising €7.5bn ($9.8bn) through a rights offering, cutting costs and more than 6,000 staff.

Non-core assets worth €48bn, including commodity divisions in Asia and the US are being sold off. Ghizzoni is working hard to retain recent acquisitions made by his predecessor, Alessandro Profumo, including German bank HVB Group and Rome-based lender Capitalia. The acquisitions caused UniCredit to post its biggest ever loss of €10.6bn in 3Q last year.

Under the terms of the bonds buyback, the holders of ten bonds have until February 3 to accept the cash offer. They will receive between 50% and 87% of face value, depending on the securities. The purchase involves €4.3bn euros of euro-denominated bonds and £1.1bn ($1.7bn) of sterling securities, the bank said.

Indications are that the rights offering, due to be completed on January 27, will be almost wholly subscribed, says Bloomberg. This buys Ghizzoni time to complete his rescue of the bank, just as the European economy heads for recession.

Capital Research & Management Co, a Los Angeles-based investment fund, had increased its stake in UniCredit to 5.4% from about 2.5%, according to filings with Consob, the Italian markets regulator.

The increased stake makes the LA fund the second-biggest investor in the bank after Abu Dhabi-based sovereign wealth fund Aabar Investments, which holds 6.05%. Last week, Aabar said it would raise its holding in the bank to 6.5%. Libyan central bank has said it won’t be increasing its 5% stake, nor will the bank’s longstanding Italian investors, in particular the various banking foundations.